Cartels are back!?

This week has seen two highlights in cartel investigations: Coordinated international dawn raids in the fragrance industry and a warning to small businesses that they are not exempt from antitrust enforcement. Here are the key reasons why both cases are important.

For years, we have observed decreasing numbers of leniency applications, cartel cases and cartel fines. There has been and still is an ongoing debate on whether businesses have simply become more compliant, or whether the risk of damage claims deters companies from leniency applications, and lenient applicants should be better protected to encourage more applications.

Antitrust regulators do in any case not get tired of emphasizing that detecting cartels is still a priority and that they are looking for new and additional ways to uncover impermissible conduct – e.g., by introducing whistle-blower tools or by using tech. And in fact, last year has seen significantly increased numbers of dawn raids in many countries.

In line with that, this week brought two investigations to light at entirely different ends of the spectrum, which are both important to note:

  • The European Commission conducted dawn raids in coordination with antitrust regulators in the UK, the US and Switzerland.
  • The Austrian regulator highlighted that antitrust rules apply to businesses of all sizes.

A scent can make memories come alive…

The Commission dawn raided several companies and an association in the fragrance industry in various EU Member States. It also sent out requests for information to other companies active in the same sector. The Commission’s press release did not name any companies, and was relatively discreet on what kind of conduct is under investigation.

…but a dawn raid might be something you wish to forget*

 Other regulators were more open: Both the British and the Swiss regulators named the companies and the conduct under investigation, which included coordination of pricing policies and conduct that is typically unilateral like limiting the production of certain fragrances.

But the content of the press releases does not matter so much. What makes this case important is the fact that there were separate press releases from several regulators: Internationally coordinated dawn raids are not the norm (though of course not unseen) and show that regulators are ready to cooperate and coordinate across borders – including across the pond – to go after cartels.

Dawn raids are no proof that illegal behaviour took place. There are many cases out there where investigations kicked off by dawn raids did not lead to fines. However, even in these cases, cartel proceedings are burdensome and disruptive for affected companies. That burden grows significantly with parallel global investigations, also because it would not be unusual for additional regulators to seize the opportunity and start their own investigations.

Antitrust is only important for the big players…

Cases like the one in the fragrance industry can fuel the perception of some that antitrust compliance is only important for large companies: All one reads about in the newspapers are proceedings against global players, so smaller companies do not really have to care, and are in any event covered by de minimis-exceptions because of their size.

…or is it?

That perception is a dangerous one. The Austrian regulator issued a clear reminder that antitrust law applies to companies of all sizes: It warned several restaurants in a town called “Ried im Innkries” – which has about 12,000 inhabitants – that they must not coordinate the prices of their burgers, kebabs, pizzas etc. The case reminds me of an investigation against local ice cream parlous in Germany a few years back.

Anyway, the Austrian regulator started to investigate following a newspaper article reporting that the restaurant owners had agreed to raise their prices to the same level. While the regulator did not issue a fine, it emphasized that any de minimis-exception does not apply to “hardcore” cartel conduct like price coordination or market sharing.


Here are my four takeaways from these two cases:

  • Regulators are out for dawn raids (again). Companies that have no form of up-to-date internal dawn raid guidelines/policy should really prepare now.
  • Regulators coordinate and help each other. We see that in merger cases (will not mention Microsoft/Activision) and now again in cartel investigations. Companies detecting problematic behaviour in one country are well advised to investigate whether this behaviour could also have affected or occurred in other countries.
  • We should expect to see more investigations kicked off by statements in newspapers, social media etc. As an antitrust lawyer (and thus also as a regulator) one may regularly stumble across quotes from company representatives – up to top-level management – that are, to put it politely, more ambiguous than they should probably be.
  • There is no safe harbour from cartel conduct. While the example of a few restaurants in a smaller Austrian town might be extreme, companies of all sizes need to take antitrust seriously. Where antitrust law was breached, investigations rarely end with only a warning.

* Credit for the headline to Luke Smith

Photo by dylan nolte on Unsplash